New Council reaffirms LCEC franchise agreement proffer

December 5, 2017

Cape Coral's newly voter reconfigured city council has reaffirmed a decision made by the previous board, agreeing Monday to bring a proposed franchise agreement directly to LCEC's elected board of directors.

Council unanimously instructed City Manager John Szerlag and two representatives from the Council For Progress, a business group working with both sides, to present the draft franchise agreement and related memorandum of understanding to the electric co-op's board.

The city's administration and Council For Progress membership have endorsed the draft proposals; LCEC's administrative staff has rejected the documents as tendered.

Szerlag will now present the documents to LCEC on Dec. 20.

And if the co-operative, which has been operating without a franchise agreement after the last 30-year contract expired last year, doesn't accept the deal, the city will consider legal options, city officials said.

Despite the on-again, off-again, often contentious negotiation process that once had the city appealing to the Florida Public Service Commission, that's a course of action neither side says it wants.

"A lawsuit does not benefit either party. The residents would be footing the bill on both sides," Mayor Joe Coviello said. "They're paying the rates to LCEC and paying taxes to the city. I'd rather sit at the table and hammer out an agreement that works for both sides."

Karen Ryan, LCEC spokesperson, took a similar view.

However, the deal on the table is not one the co-op can accept, she said, adding the utility has already read the city's draft franchise agreement and memorandum of understanding and the board plans to reject it.

"We're disappointed the city has taken that stance. Over the last two years there have been many attorneys, consultants involved in it, not to mention city and LCEC staff. Millions has already been spent on this." Ryan said. "We're at an impasse. We do not think the city's agreement is in the best interest of our customers."

Brian Rist and Joe Mazurkiewicz of the Council For Progress, which has been the facilitator during the most recent talks, spoke to the Council Monday about getting the best deal they can for the city and not tying the hands of a future council 20 years down the road, since they don't know what will happen.

Mazurkiewicz said that most of what they did was talk in a philosophical nature about what both sides wanted and not actually negotiate.

"We listened to both sides and established our positions. There were 31 issues and we talked the city away from 19 of them," Mazurkiewicz said. "The city moved to the recommendations that we made."

Mazurkiewicz said that many of the recommendations would not be costly to LCEC, with the exception of street lighting. He also said the main issue is the ability to get new technology to the Cape in the event it becomes available and makes electric generation less expensive.

Coviello said technology is especially important.

"Technology is an unknown. The cost of providing electrical service in the future might come down based on that, but it's hard to predict what it will be in the next 10 to 20 years," Coviello said.

Ryan said it's that unknown entity that prevents LCEC from agreeing with that provision.

"We put in automated meters in 2003 when many companies didn't have them. We've had net metering for solar power for three years," Ryan said. "This is our business. We're connected with new technology. If it makes sense for our customers, we will implement it. We can't agree on something if it's vague or we don't know what it means."

The original 30-year franchise agreement between the city and LCEC expired last Sept. 30, with negotiations becoming very testy before and after the expiration of the agreement. Currently, LCEC is working under the terms of the initial agreement and will do so until a new deal can be consummated.

Negotiations have been far from cordial. The city filed a complaint last year with the Florida Public Service Commission which sought a cost of service study and examination on LCEC's rate structure, which was withdrawn by the city "as a show of good faith at the negotiating table."

According to the terms of the proposals to be presented, the city seeks a 20-year term with a 10-year option to renew if there's no agreement default. LCEC wants a straight 30-year agreement with a buyout option.

The city also wants a 3 percent franchise fee the first year, which can increase to 4.5 percent in the first five years and 6 percent after. It also wants an audit of franchise fees every three years as opposed to every five from LCEC, an 85 percent reliability rate and a bulk rate for the city for streetlights.

LCEC has countered with it's latest offer and the three agreements LCEC has with Marco Island, Sanibel and Lee County. The city can pick one and it will be over, Ryan said.